Arena Pharmaceuticals, Inc.
Jul 23, 2001

Arena Pharmaceuticals Announces 2001 Second Quarter and Six Months Results and Reaffirms Financial Guidance for 2001

SAN DIEGO, Jul 23, 2001 /PRNewswire/ -- Arena Pharmaceuticals, Inc. (Nasdaq: ARNA) today reported revenues of $3.3 million for the quarter ended June 30, 2001, a 158% increase over second quarter 2000 revenues, and $8.7 million for the six months ended June 30, 2001, a 576% increase over the six months ended June 30, 2000. Increased revenues in the second quarter and the first half of 2001 were attributable to collaborations, which included research funding, milestone payments and technology access and development fees. The Company reported a net loss for the second quarter and first half of 2001 of $3.1 million, or $.14 per share and $2.1 million, or $.09 per share after non-cash accounting and amortization charges of $1.5 million and $2.9 million, respectively. This compares with prior year losses for the second quarter and first half, before any non-cash preferred stock charges, of $2.9 million, or $.21 per share and $6.0 million, or $.51 per share on a pro forma basis, respectively.

Research and development expenses nearly doubled to $5.2 million in the second quarter of 2001 as compared to $2.7 million in the second quarter of 2000 and for the six months ended June 30, 2001 research and development expenses increased by $4.0 million to $9.1 million from $5.1 million for the six months ended June 30, 2000.

Cash and cash equivalents totaled $222.9 million at June 30, 2001 and reflect the net proceeds from the Company's secondary offering that was completed in June 2001. Cash and cash equivalents at June 30, 2001 do not include the net proceeds of approximately $19.5 million related to the underwriters' exercising their over-allotment option on the Company's secondary offering in late June 2001. The Company received the over-allotment proceeds on July 2, 2001.

"Arena initiated Project Genesis as a defined internal research focus early this year. We believe that we are making significant progress toward our Project Genesis goals of acquisition, mapping, and completion of medicinal discovery at all G-coupled protein receptor targets. We believe that this significant scientific undertaking is important for Arena's long term success and growth," said Jack Lief, President and CEO. "I am very pleased that in a very tough financial market, we were able to complete our secondary offering, and I believe that a significant component of the success of our offering was based upon the positive reception that Project Genesis has received. We expect that the information that we are developing from Project Genesis will significantly help to both enhance the value of our CART Technology deals and to provide us with the ability to select interesting and lucrative targets for our own internal drug development. We believe Arena's performance during the first half of this year is on track to deliver both positive earnings for the entire year as well as the discovery of new and exciting drug leads."

Arena's CART Technology allows for the direct identification of modulators of G protein-coupled receptors in a ligand-independent manner, making the technology particularly useful with respect to orphan GPCRs, which are estimated to comprise approximately 2% of the human genome. Such ligand-independent screening is made possible by genetic alteration of these receptors, using routinely applicable and proprietary genetic cassettes. Arena has initiated "Project Genesis," an internal program aimed at obtaining all of the human GPCRs, identifying the location of these receptors within normal and diseased tissue of the human body for purposes of understanding the function of such receptors, and screening each GPCR to identify receptor modulators that form the basis of drug candidates. Arena's CART Technology, in conjunction with Arena's recent acquisition of the Melanophore Technology, is intended to facilitate completion of Project Genesis within the next three to five years. Arena is using the Melanophore Technology in combination with its CART Technology for internal drug discovery purposes. Through BRL Screening, Inc. (BRL), Arena intends to also license the Melanophore Technology to biotechnology and pharmaceutical organizations.

Certain statements in this press release are forward-looking statements that involve a number of risks and uncertainties, and actual events or results may differ materially from Arena and BRL expectations. Important factors that could cause actual results to differ materially from those stated or implied by Arena's and BRL's forward looking statements due to risks and uncertainties associated with Arena's and BRL's business include, but are not limited to, the following: future quarterly or annual financial results; the timing, success and cost of preclinical research, out-licensing endeavors and clinical studies, and receipt of additional milestone payments, if any, from collaborators. Additional risk factors that could cause actual results to differ materially from those in Arena's or BRL's forward looking statements are disclosed in Arena's SEC reports, including, but not limited to, Arena's registration statement filed June 21, 2001 on Form S-1, as amended, its most recent quarterly report on Form 10-Q and its 2000 annual report on Form 10-K. These forward-looking statements represent Arena's judgment as of the date of this release. Arena and BRL each disclaim, however, any intent or obligation to update these forward-looking statements.

                           Arena Pharmaceuticals, Inc.
                 Condensed Consolidated Statements of Operations

                         Three months ended             Six months ended
                              June 30,                      June 30,
                        2001           2000           2001           2000
                    (unaudited)     (unaudited)    (unaudited)    (unaudited)

    Revenues
      Total
       revenues      $3,330,255     $1,289,271     $8,722,590     $1,289,271

    Expenses

    Research and
     development      5,241,523      2,681,630      9,144,864      5,080,987
    General and
     administrative   1,331,573        495,671      2,357,556        919,500
    Amortization
     of non-cash
     deferred
     compensation     1,072,731      1,419,565      2,341,397      1,829,044
    Amortization
     of acquired
     technology
     and other
     purchased
     intangibles        384,249             --        512,332             --
        Total
         expenses     8,030,076      4,596,866     14,356,149      7,829,531

    Interest
     and other
     income, net      1,554,141        421,513      3,572,873        531,978

    Net loss         (3,145,680)    (2,886,082)    (2,060,686)    (6,008,282)

    Non-cash
     preferred
     stock charge            --     (8,203,505)            --    (22,391,068)

    Net loss
     applicable
     to common
     stockholders   $(3,145,680)  $(11,089,587)   $(2,060,686)  $(28,399,350)

    Net loss per
     share, basic
     and diluted         $(0.14)         $(8.47)       $(0.09)       $(23.70)

    Shares used in
     calculating
     net loss
     per share,
     basic and
     diluted         22,819,360      1,309,968     22,556,573      1,198,238

    Pro forma
     net loss
     per share                          $(0.81)                       $(2.43)

    Shares used in
     calculating
     pro forma
     net loss
     per share                      13,761,385                    11,695,092


    Note:  The loss per share on a pro forma basis assumes the conversion of
           the redeemable preferred stock into common stock as of the date of
           issuance.  The redeemable preferred stock converted into common
           stock at the closing of the Company's initial public offering on a
           one-for-one basis.


    Condensed Consolidated                    June 30,      December 31,
     Balance Sheet Data:                        2001            2000
                                            (unaudited)

    Assets
      Cash and cash equivalents             $222,927,441    $144,413,176
      Proceeds due from
       over-allotment exercise                19,545,000              --
      Other current assets                     4,576,238       3,801,268
      Property and equipment, net             13,248,698       4,265,260
      Acquired technology and
       other assets                           16,974,319         232,225
        Total assets                        $277,271,696    $152,711,929

    Liabilities and Stockholders' Equity
      Liabilities                              5,089,786       3,927,604
      Stockholders' equity                   272,181,910     148,784,325
        Total liabilities and
         stockholders' equity               $277,271,696    $152,711,929
"Arena Pharmaceuticals" and the corporate logo are registered U.S. trademarks of the Company. "Arena," "CART" and "BRL Screening" are trademarks of the Company. Arena's headquarters are located at 6166 Nancy Ridge Drive, San Diego, CA 92121. On the Internet, please refer to the Investor Relations Center at Arena's website: http://www.arenapharm.com for further information.
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SOURCE Arena Pharmaceuticals, Inc.

CONTACT:          Jack Lief, President & CEO, ext. 223, or Joseph Mooney, CFO,
                  ext. 508, of Arena Pharmaceuticals, Inc., +1-858-453-7200